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2001 (4) TMI 224 - HC - Customs

Issues Involved:
1. Validity of the Memorandum No. T-4/1/SU/81(SCN), dated 11th June, 1981.
2. Interpretation of Section 10(1)(a) and Section 23 of the Foreign Exchange Regulation Act, 1947 (FERA, 1947).
3. Applicability of penal provisions under Section 23(1)(a) of FERA, 1947.
4. Consideration of 'mens rea' in penal consequences under FERA, 1947.

Issue-wise Detailed Analysis:

1. Validity of the Memorandum No. T-4/1/SU/81(SCN), dated 11th June, 1981:
The writ petitioners, a bank and its officers, challenged the Memorandum issued by the Special Director, Enforcement Directorate, under FERA, 1947, directing them to show cause for the delay in repatriating Rs. 15,02,351 as determined by the Income-tax Authorities. The petitioners contended that there was no violation of Section 10(1)(a) of FERA, 1947, and that the Memorandum lacked jurisdiction. They argued that the repatriation was delayed due to reassessment by the Income-tax Authorities and subsequent directions from the Reserve Bank of India (RBI). The court found that the delay was not attributable to the petitioners' fault and that the RBI had already dealt with the matter under Section 10(2) of FERA, 1947. Thus, the Memorandum was deemed invalid.

2. Interpretation of Section 10(1)(a) and Section 23 of FERA, 1947:
The court examined the interpretation of Section 10(1)(a) and Section 23 of FERA, 1947. Section 10(1)(a) prohibits delaying the receipt of foreign exchange without RBI's permission. Section 23 provides penalties for contraventions of Section 10. The court emphasized that Section 10(1)(a) cannot be considered in isolation from Section 10(2), which allows RBI to issue directions for securing foreign exchange. The court concluded that a violation of Section 10(1)(a) would only attract penalties under Section 23 if there was non-compliance with RBI's directions under Section 10(2).

3. Applicability of penal provisions under Section 23(1)(a) of FERA, 1947:
The court held that for any delay in repatriation to attract penal provisions under Section 23(1)(a), there must be a failure to comply with RBI's directions under Section 10(2). In this case, the RBI had directed the petitioners to repatriate the amount, and they complied immediately. Therefore, the delay in repatriation from the date of reassessment (1967) to the date of RBI's direction (1974) could not attract penal consequences under Section 23(1)(a).

4. Consideration of 'mens rea' in penal consequences under FERA, 1947:
The court emphasized the importance of 'mens rea' (guilty mind) in penal statutes. It noted that the petitioners had no intention to violate the law and had acted in accordance with the prevalent policies and RBI's directions. The court concluded that the absence of 'mens rea' meant that the petitioners could not be held liable for penal consequences under Section 23(1)(a) of FERA, 1947.

Conclusion:
The court quashed the impugned Memorandum and the subsequent notice under Rule 3(1) of the Adjudicating Proceeding and Appeal Rules, 1974. It held that the delay in repatriation was not due to any fault of the petitioners and that they had complied with RBI's directions. The writ application was allowed, and the prayer for stay of the judgment was refused.

 

 

 

 

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